Some 34,700 Irish citizens emigrated in the 12 months to April this year. Teachers, nurses, doctors, engineers, accountants, tradespeople and others headed off. Just like many of those coming to Ireland, those leaving are seeking new experiences, better jobs and higher pay. For some, it’s a short-term plan with a view to turbocharging their housebuying prospects back home.
On the flip side, about 30,000 Irish citizens returned to Ireland in that year. Returning Irish citizens were the largest single nationality entering the State. Mortgage brokers and estate agents report they are coming back with outsize purchasing muscle, buying with a substantial deposit and even in cash.
Whether you are emigrating temporarily to save for a house or you are abroad and thinking of returning, here’s what you need to know.
Having saved overseas, some returning emigrants apply for a mortgage as soon as they get home. With rents sky high, they want to minimise the dent in their savings. And where there is a big gap between their pay overseas and what they will earn at home, some are seeking mortgage approval while still away.
“It can almost be easier for a teacher now to get a mortgage while they are in Dubai than if they wait to come home and start working in Ireland: it can actually be harder for them when they come home,” says Darragh O’Sullivan, expat mortgage manager at Mortgage123.ie.
He is “inundated” with applicants at the moment, he says, the bulk of whom are working in the Middle East.
“There are 10,000 Irish people on working visas in Dubai and Abu Dhabi. You can’t go there unless you have a visa and a job, so it’s all graduates and people in good professions – banking accountancy, finance, medical, aircraft leasing, oil and gas engineering and just a huge amount of teachers,” says O’Sullivan.
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The bigger salaries earned tax-free mean some people are going there specifically with a house purchase at home in mind. Doing so means they can leapfrog to home ownership years ahead of peers doing the same job at home.
New teachers in Ireland earn about €42,000 a year, or about €2,759 per month after tax. On that income, paying rent while saving for a deposit is difficult.
A teacher can expect to earn up to €4,000 a month in the United Arab Emirates (UAE), tax-free, while also benefiting from heavily subsidised or free housing.
Lending rules
Lending to a non-resident is risky for Irish banks so, unsurprisingly, they take measures to insulate themselves. They will only lend 70 per cent of the value of a house to a non-resident, so people applying from overseas will need a 30 per cent deposit instead of the usual 10 per cent, says O’Sullivan.
This isn’t a problem for those earning a strong income. “When they are being paid tax-free, the 30 per cent deposit tends not to be an issue because they are saving so much while they are over there,” says O’Sullivan.
“It can be harder for the person in Ireland to come up with a 10 per cent deposit than the person in Dubai to come up with 30 per cent,” says O’Sullivan.
When crunching the numbers, a bank will factor in a stress test to insulate against currency fluctuation too.
“Whichever country you are applying from, they will deduct 20 per cent for currency stress-testing, so you are only going to get credit for 80 per cent of what you are earning,” says O’Sullivan.
If someone is earning $100,000, the bank will allow them $80,000. They will convert that figure to euro and that’s the figure they will use in the calculator.
And the lender will also stress test on the other side of the equation. For whatever amount of money you want to borrow, the bank will assume repayments rise by up to 8 per cent. For example, a proposed monthly repayment of €2,000 will be stress-tested up to €2,160.
“You need to demonstrate in your accounts for the last six months that you have surplus income to that [stress tested] figure so that you could have paid this mortgage for the past six months,” says O’Sullivan. “But then if you are being paid in the Middle East, in a non taxpaying country, it’s easier to pass these tests.”
Lenders will also factor in your mortgage or rent commitment in your adopted country. Until you move home, you will be continuing to pay that.
Where the person receives an accommodation allowance, as many UAE-based teachers do, this is particularly “mortgage calculator-friendly”, says O’Sullivan. The applicant can evidence servicing a rent commitment each month, even though it is technically being paid by the employer.
No credit?
Even though banks’ lending calculators are tougher on overseas mortgage applicants, it can still make more sense to apply for a mortgage while you are abroad than to wait until you get home. This can be especially true for teachers or others who face a drop in income on their return.
O’Sullivan takes the example of a young teacher who has not been able to avail of a career break.
“If they are teaching for five years in a secondary school in Dubai, they don’t actually get credit for that. An Irish bank won’t lend to someone who is not in a permanent role when they come home. You can’t draw down your mortgage if you are not in a permanent role.”
Teachers coming back to a temporary contract will struggle to get a mortgage “but if they are in the Middle East, they can actually do it, they can draw down”, says O’Sullivan. This may cause some to prolong their stint away.
“They don’t want to be going back into the rental market, or living with family. They know they would be in a stronger position to go for a mortgage while they are still abroad.”
Mid-career returning emigrants also don’t want to walk back into the same challenges of a shortage of rental properties and the sky-high rents they may have fled. That’s why they are buying before returning.
“A lot of them don’t have an exact time frame of when they are moving back – it could be six months or two years. But they like the security of knowing ‘well at least we have a home back in Ireland now’,” says O’Sullivan.
It is critical for those overseas to shop around for the best mortgage interest rate. Some are offered the standard home loan rate, which is the same as resident mortgage applicants. Others, however, can be offered a higher “investor” rate, which at the moment can be more than 5 per cent. A broker is best placed to navigate this for you, comparing rates from multiple lenders.
Returning first-time buyers will miss out on Government help schemes such as the Help to Buy scheme, which is based on tax rebates that are based on your last four years of work in Ireland.
Having to come up with a 30 per cent deposit is a hurdle but doing so means borrowing less and probably paying less in interest over time.
“It’s a great position to be in if you are only borrowing 70 per cent versus 90 per cent,” says O’Sullivan. “Your loan-to-value is quite strong so you may get better offers on interest. You are giving yourself a head start with that.”
Unlike their parents who paired with a mortgage provider for life, younger borrowers are always looking for a better deal, says O’Sullivan. “They treat their mortgage like a utility bill – ‘where is the cheapest money?’. There is no loyalty.”
“If your loan-to-value is lower starting out and you are going to keep changing your mortgage every three to four years, constantly seeking the best offers, you are going to keep getting a better offer than someone who borrowed at a 90 per cent loan-to-value,” he says.
Wait until home
For some people, however, applying while abroad is less attractive. Some 10,600 people left Ireland to live in Australia in the 12 months to April 2024 – more than double the previous year. Some 6,400 moved to Ireland from Australia in the same period.
Nurses, teachers and doctors may get paid more and be taxed less in Sydney than in Dublin, but it can still be difficult to reach the 30 per cent deposit required of overseas mortgage applicants. Without that, they can still get approved for a mortgage but they won’t be able to draw it down until they are permanently employed in Ireland, says Michael Dowling of Dowling Financial.
He sees returning emigrants in their mid-30s to mid-40s with good deposits. “Rarely would I have emigrants coming back looking for 90 per cent; they would have at least 10 per cent, if not 20 per cent of the purchase price. The older they are, the bigger the deposit.”
They will still have to demonstrate repayment capacity in Ireland, however, says Dowling.
“The bank will say, [a nurse] was on a much bigger income in Australia; that’s why she could save €2,000 a month. In Ireland, she might be able to save an awful lot less,” he says.
“Banks will look at what rent you were paying, or the savings you had when you were abroad,” says Dowling. “If there is a significant difference between your income when you were abroad and here, they will ask for six months’ evidence of you paying rent in Ireland, or saving in Ireland. You need to establish your repayment capacity here.”
Borrowers will need to provide a credit check report covering their time overseas. Those moving back in with Mum and Dad will need to show savings equivalent to rent.
“It’s really about them re-establishing their credentials when they come back – the job that becomes a permanent job and the repayment capacity – that’s the real kernel of it.”
Those returning like to have something to show for their time spent abroad, says O’Sullivan.
“Young people are quite mature. If someone goes away, it’s nice to show you got something out of it, such as ‘I was able to do a 50 per cent mortgage, there is no way I could do that if I stayed here’.”
